Don't expect mortgage rates to fall much further this year

Photo: The Good Brigade (Getty Images)
Photo: The Good Brigade (Getty Images)

While mortgage rates have been mostly on the decline for the last several months, they don’t have much further to fall.

Goldman Sachs (GS) lowered its year-end 2024 and 2025 30-year conforming mortgage rate forecasts to 6.0% and 6.05%, respectively, from a prior forecast of 6.5% and 6.1%, economists said in a note published Wednesday.

But with the latest Freddie Mac (FMCC) Primary Mortgage Market Survey rate coming in at 6.12% — a slight uptick from 6.08% a week earlier but still on the lower end, Goldman said there is “limited room” for further major declines.

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“We think the decline in mortgage rates has largely run its course,” the strategists said.

Mortgage demand spiked ahead of the Federal Reserve’s decision to lower interest rates last month — the first time it had done so since 2020. This latest uptick was not wholly unexpected, given that many economists saw the months-long decline in mortgage rates as the market’s adjustment to anticipated lower interest rates.

“While rates may continue to fall as the Fed provides more guidance on its future monetary policy, the majority of the adjustment in mortgage rates appears to have already been priced in,” Ruben Gonzalez, chief economist at Keller Williams, said in a statement following the rate decision.

There was still an increase in purchase applications last week, a jump that was largely offset by a decline in refinancing activity, that appears to be an early sign that homebuyers are re-entering the market, said Mike Fratantoni, Mortgage Bankers Association’s chief economist.

There have been some signs of a loosening housing market. In August, there were almost 36% more homes for sale on a typical day compared with a year ago — the highest level since May 2020, Realtor.com (NWSA) found. At the same time, the median home sale price was $434,050, up 3.2% from a year prior but a slower rate of price growth than in previous months.

Goldman said, however, that there is little evidence suggesting that housing supply has recovered. Despite the seeming recovery in homes for sale, for example, the 1.5 million units available is still far below the 40-year average of 2.3 million homes, the strategists noted. They also pointed to still-poor housing affordability, and continued strong price growth as other indicators that the market is not due for recovery at any time soon.

Americans have also indicated that they would need a much steeper decline in mortgage rates — with a 30-year fixed rate of 6%, if not lower — to actually consider a move, according to a Bankrate survey.

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